The euro before the financial crisis of 2008: an integrating and stabilizing factor. Jean Monnet/Robert Schuman Vol. 13 No. 9, June 2013

From the Introduction. The main focus of this study is to examine whether the euro has been an economic, monetary, fiscal, and social stabilizer for the Eurozone. In order to do this, the underpinnings of the euro are analysed, and the requirements and benchmarks that have to be achieved, maintained, and respected are tested against the data found in three major statistics data sources: the European Central Bank’s Statistics Data Warehouse (http://sdw.ecb.europa.eu/), Economagic (www.economagic.com), and E-signal. The purpose of this work is to analyse if the euro was a stabilizing factor from its inception to the break of the financial crisis in summer 2008 in the European Union. To answer this question, this study analyses a number of indexes to understand the impact of the euro in three markets: (1) the foreign exchange market, (2) the stock market, and the Crude Oil and commodities markets, (3) the money market.

The euro area's tightrope walk: debt and competitiveness in Italy and Spain. Bruegel Policy Contribution 2013/11, September 2013

Competitiveness adjustment in struggling southern euro-area members requires persistently lower inflation than in major trading partners, but low inflation worsens public debt sustainability. When average euro-area inflation undershoots the two percent target, the conflict between intra-euro relative price adjustment and debt sustainability is more severe. In our baseline scenario, the projected public debt ratio reduction in Italy and Spain is too slow and does not meet the European fiscal rule. Debt projections are very sensitive to underlying assumptions and even small negative deviations from GDP growth, inflation and budget surplus assumptions can easily result in a runaway debt trajectory. The case for a greater than five percent of GDP primary budget surplus is very weak. Beyond vitally important structural reforms, the top priority is to ensure that euro area inflation does not undershoot the two percent target, which requires national policy actions and more accommodative monetary policy. The latter would weaken the euro exchange rate, thereby facilitating further intra-euro adjustment. More effective policies are needed to foster growth. But if all else fails, the European Central Bank’s Outright Monetary Transactions could reduce borrowing costs.

The development of the eurozone. Jean Monnet/Robert Schuman Paper Series Vol. 13 No. 2, January 2013

From the Introduction. It is the year 1946 and the Second World War has just ended and not even thirty years had passed since the ‘war to end all wars’ ended, how ironic. Numerous countries in Europe suffered from both the loss of lives and the destruction of land. Powerful countries had been demolished and almost every country on European soil had been affected in some way or another. Change needed to happen for the European people, everyone knew it, and Winston Churchill voiced it. In his speech at Zurich University in 1946, Churchill brought up ideas that would forever change Europe.

Can the eurozone survive? Jean Monnet/Robert Schuman Paper Series Vol. 12, No. 4, May 2012

From the Introduction. As financial and economic turmoil continues to rock the Eurozone nations and even threatens to undermine the political stability in the region, it may be helpful to recall the circumstances that helped bring about the formation of the European Union and the common currency of the Eurozone. While issues of trade, finance, and economics were at the heart of many of the agreements upon which the European Union was founded, there were larger issues about a shared future for Europeans that went beyond fiscal concerns. As the economic conditions in Europe and the rest of the world appear to have brought the Eurozone to the brink of collapse, the question at hand is whether the strength of the euro and the economies of the Eurozone nations will be able to withstand the forces that threaten not just the economic ties among the nations of the Eurozone and the EU, but that also strain the historical, cultural, and political foundations on which those economic ties were forged.

The State of the Union(s): The Eurozone Crisis, Comparative Regional Integration and the EU Model

No abstract.

The Euro Crisis, the Other Crisis and the Need for Global Thinking

In addition to the euro crisis the EU faces a second, more existential crisis, in the form of an ill-defined notion of the Union’s global role. This contribution argues that the euro crisis should not redefine perceptions of the EU on the global stage, which it is in danger of doing. Instead, the EU and its members should embark upon a strategic reassessment in order to define three core interrelated factors. First, the nature of the EU’s actorness remains ill-defined and it is therefore necessary to explain, both within and beyond the Union, what its global role is. Second, in order to facilitate the joining up of the myriad of sub-strategies in EU external relations, the notion of ‘red lines’ should be considered which define specific aspects of behaviour that are mainstreamed throughout the EU’s external actions and, more importantly, upheld. Third, in spite of the rapid development of the harder elements of the EU’s actorness over the last decade or so, there remains a worrying gap between rhetoric and reality. This aspect is of particular concern for the United States and will affect perceptions of the EU’s ability to be a genuine strategic partner at a time of dramatic change in the international system. By engaging in what will inevitably be a difficult debate, the EU and its members will not only help give purpose and strategic direction to the Union’s actions on the international scene, it will also speak to the euro crisis since both are fundamentally about the future shape and direction of European integration.

The Discursive double game of EMU reform: the clash of titans between French White Knight and German Iron Lady. Paper presented at the 9th Biennial Conference European Community Studies Association–Canada (ECSA-C), Ottawa, Ontario, April 27-28, 2012

From the Introduction. In the aftermath of the EU’s enlargement towards Central and Eastern Europe, many scholars and observers of European integration were proclaiming that the French-German “engine” of Europe had come to an end. The political legitimacy of French-German initiatives was contested by coalitions of smaller member states and the ‘new Europe’ was calling for new leadership dynamics. However, the experience of the Eurozone debt crisis provided dramatic evidence that no alternative to the Franco-German partnership has yet to emerge in the enlarged EU. In a time of existential crisis, Franco-German initiatives appear to have remained the basic dynamic of integration. However, unlike in the past, agreements on steps forward have proven to be particularly difficult. This is largely due to these countries’ contrasting political economic policy ideas, cultures, and practices....the paper analyses the ideational ‘frames’ of the two leaders while tracing their discursive interactions against changing background conditions since the European debt crisis was triggered by Greece in October 2009 until the last measures taken in 2012 before the French Presidential elections. The empirical analysis is based on a systematic corpus of press conferences and media interviews by Nicolas Sarkozy and Angela Merkel after European summits. It is complemented by a number of press interviews including some given by their respective Finance Ministers) and important speeches in that same period of time.

The Legacy of Austerity in the Eurozone. CEPS Commentary, 4 October 2013

The recent slight improvement in the GDP growth rates in the eurozone has led European policy-makers to proclaim victory and assert that the austerity programmes imposed within the eurozone are paying off. But is this really the case? In this Commentary Paul De Grauwe and Yuemei Ji argue that the improvement in the eurozone business cycle is the result of the ECB’s announcement of its Outright Monetary Transaction (OMT) programme, and that austerity has left a legacy of unsustainable debt that will test the political resilience of the debtor countries.

Proposal for a Stabilisation Fund for the EMU. CEPS Working Document No. 385, 14 October 2013

This paper argues that it should be possible to complement Europe’s Economic and Monetary Union with an insurance-type shock absorption mechanism to increase the resilience of member countries to economic shocks and reduce output volatility. Such a mechanism would neither require the establishment of a central authority, nor would it lead to permanent transfers between countries. For this mechanism to become a reality, however, it would be necessary to overcome certain technical problems linked to the difficulty of anticipating correctly the position of an economy in the business cycle.

Modularisation épistatique des loci à trait quantitatif associés à la pression artérielle et identification de gènes candidats pour l’hypertension

Problématique: L’hypertension artérielle essentielle, facteur de risque majeur dans le développement des maladies cardiovasculaires, est un trait multigénique complexe dont les connaissances sur le déterminisme génétique nécessitent d’être approfondies. De nombreux loci à trait quantitatif (QTLs); soit des gènes responsables de faire varier la pression artérielle (PA), ont été identifiés chez l’humain et le modèle animal. Cependant, le mystère plane encore sur la façon dont ces gènes fonctionnent ensemble pour réguler la PA. Hypothèse et objectif: Plutôt qu’une addition de QTLs ayant chacun une action infinitésimale sur la PA, une interaction épistatique entre les gènes serait responsable du phénotype hypertendu. Ainsi, l’étude de cette épistasie entre les gènes impliqués, directement ou indirectement, dans l’homéostasie de la PA nous permettrait d’explorer de nouvelles voies de régulation moléculaire en cause dans cette maladie. Méthodes: Via la réalisation de souches congéniques de rats, où un segment chromosomique provenant d’une souche receveuse hypertendue (Dahl Salt Sensitive, SS/Jr) est remplacé par son homologue provenant d’une souche donneuse normotendue (Lewis, LEW), des QTLs peuvent être mis en évidence. Dans ce contexte, la combinaison de QTLs via la création de doubles ou multiples congéniques constitue la première démonstration fonctionnelle des interactions intergéniques. Résultats: Vingt-sept combinaisons au total nous ont menés à l’appréciation d’une modularisation des QTLs. Ces derniers ont été catégorisés selon deux principaux modules épistatiques (EMs) où les QTLs appartenant à un même EM sont épistatiques entre eux et participent à une même voie régulatrice. Les EMs/cascades agissent alors en parallèle pour réguler la PA. Grâce à l’existence de QTLs ayant des effets opposés sur la PA, nous avons pu établir l’ordre hiérarchique entre trois paires de QTLs. Cependant, lorsque cette suite régulatrice ne peut être déterminée, d’autres approches sont nécessaires. Nos travaux nous ont mené à l’identification d’un QTL situé sur le chromosome 16 du rat (C16QTL), appartenant au EM1 et qui révélerait une nouvelle voie de l’homéostasie de la PA. Le gène retinoblastoma-associated protein 140 (Rap140)/family with sequence similarity 208 member A (Fam208a), présentant une mutation non synonyme entre SS/Jr et LEW est le gène candidat le plus plausible pour représenter C16QTL. Celui-ci code pour un facteur de transcription et semblerait influencer l’expression de Solute carrier family 7 (cationic amino acid transporter, y+ system) member 12 (Slc7a12), spécifiquement et significativement sous exprimé dans les reins de la souche congénique portant C16QTL par rapport à la souche SS/Jr. Rap140/Fam208a agirait comme un inhibiteur de la transcription de Slc7a12 menant à une diminution de la pression chez Lewis. Conclusions: L’architecture complexe de la régulation de la PA se dévoile mettant en scène de nouveaux acteurs, pour la plupart inconnus pour leur implication dans la PA. L’étude de la nouvelle voie de signalisation Rap140/Fam208a - Slc7a12 nous permettra d’approfondir nos connaissances quant à l’homéostasie de la pression artérielle et de l’hypertension chez SS/Jr. À long terme, de nouveaux traitements anti-hypertenseurs, ciblant plus d’une voie de régulation à la fois, pourraient voir le jour.

Strong governments, weak banks. CEPS Policy Brief No. 305, 25 November 2013

Banks in the northern eurozone have capital ratios that are, on average, less than half of the capital ratios of banks in the eurozone’s periphery. The authors explain this by the fact that northern eurozone banks profit from the financial solidity of their governments and follow business strategies aimed at issuing too much subsidised debt. In doing so, they weaken their balance sheets and become more fragile – less able to withstand future shocks. Paradoxically, financially strong governments breed fragile banks. The opposite occurs in countries with financially weak governments. In these countries banks are forced to strengthen themselves because they are unable to rely on their governments. As a result they have significantly more capital and reserves than banks in the northern eurozone. Recommendations More than in the south, the governments of northern Europe should stand up and force the banks to issue more equity. This should go much further than what is foreseen in the Basel III accord. If the experience of the southern eurozone countries is any guide, banks in the north of the eurozone should at least double the capital and the reserves as a percentage of their balance sheets. Failure to do so risks destroying the financial solidity of the northern European governments when, in the future, negative shocks force these governments to come to the rescue of their undercapitalised banks. The new responsibilities entrusted to the European Central Bank as the single supervisor in the eurozone create a unique opportunity for that institution to change the regulatory and supervisory culture in the eurozone – one that has allowed the large banks to continue living dangerously, with insufficient capital.

European banking disunion. CEPS Commentary, 14 November 2013

In this CEPS Commentary Daniel Gros argues that the purpose of the euro was to create fully integrated financial markets; but, since the start of the financial crisis in 2008, markets have increasingly separated along national lines. So the future of the eurozone depends crucially on whether that trend continues or is reversed and Europe’s financial markets in the end become fully integrated. But either outcome would be preferable to something in between – neither fish nor fowl. Unfortunately, that is where the eurozone appears to be headed.

Lisbon Fado: The European Union under Reform

From the Introduction. To address the uncertainties surrounding the Treaty of Lisbon, this book examines several issues from various angles. Regardless of the results of the second referendum in Ireland and the pending ratifications in Poland, the Czech Republic and Germany, the European Union (EU) will not be the same after the Lisbon Treaty. If it comes into effect, Europeans will enter into a new stage in the deepening of the integration process; if it is rejected, the first decade of the 21st Century will represent a period of institutional stagnation in Europe’s integration. Nonetheless, the chapters in this book share the consensus that, despite its limitations, the Lisbon Treaty will make the EU decision making process more efficient, enhance regional democracy and strengthen its international voice.

Quelles solidarités pour surmonter la crise de la zone Euro? = What solidarity to overcome the crisis in the Euro zone? Egmont European Affairs Paper, April 2013

None.

The fragility of two monetary regimes: The European Monetary System and the Eurozone. National Bank of Belgium Working Paper No. 243, October 2013

The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium.